Pub. 3 2013 Issue 3

10 www.azbankers.org the bank prudently required the customer to sign a waiver that specifically warned again of the risk of loss posed by a stolen password because of the customer’s refusal (based on grounds of mere inconvenience) to adopt the bank’s recom- mended enhanced security measure. Unfortunately the very thing that the bank warned of is exactly what happened to the customer. Someone hacked into the customer’s computer, obtained the user id and password login information, and ordered a wire transfer of $440,000. The money ended up being transferred to a bank in Cyprus (which was a well-known money-laundering location at least until recent events resulted in a banking crisis there – but that’s another story). Despite the bank’s recommendations, warnings and the customer’s waiver, the customer sued the bank, argu- ing that the lender has the duty to ensure that such theft does not occur. The court, however, reasoned that the “dual control system” offered by the bank qualified as a commercially reasonable security procedure under the Missouri statutory scheme (which essentially codifies the Uniform Commercial Code). The customer had turned down multiple opportunities to take advantage of these security measures and signed a form indicating its understanding that by waiving the procedure, any single individual who had access to a user ID and password, even through theft, would be able to wire funds to another financial institution without restriction. The warning was clean, concise, and specific, and by refusing the protocol, the customer assumed the risk. Such a finding leads to the next question: What is the best way to create such a disclaimer that carries with it the greatest likelihood of enforceability? The rule of thumb is the same as in any other drafting context: keep the text clear and concise, such that it can be understood quickly after a skimmed read. Make the key provisions conspicuous – those that discuss the shift in the risk of loss that the document is intended to make. This case stands for the proposition that a well-drafted, easy-to- understand disclaimer can – and should – be enforced against a wayward customer. Z For more informa Ɵ on contact Chris Ɵ an C. M. Beams at (602) 440-4818; cbeams@rcalaw.com . Chris is a shareholder in the bankruptcy, lendingandcommercial li Ɵ ga Ɵ onprac Ɵ cegroups at Ryley Carlock & Applewhite. Fred Bellamy is a shareholder inthecommercial li Ɵ ga Ɵ onprac Ɵ cegroupandcanbereached at 602-440-4835; ĩ ellamy@rcalaw.com . Q “Enough is Enough” — continued from page 9 Please Contact Paul Hickman at Phickman@azbankers.org to Register. Be Part of the Bankers and Directors Advocate for Be Ʃ er Solu Ɵ ons in Washington, D.C. | October 2 & 3, 2013. Arizona Bankers Associa Ɵ on Fall 2013 Federal Advocacy Mission In addi Ɵ on to visi Ɵ ng with Members of our congressional delega Ɵ on in their natural habitat, we will be mee Ɵ ng with senior policy- making and regulatory o ffi cials at CFPB, Treasury, FHFA (receiver for Fannie and Freddie), the Federal Reserve, and the FDIC. Solution